Have you ever shopped for groceries at a Walmart, a Trader Joe’s, an Aldi, a Costco, a Whole Foods, or a Target?
If you have, you know that clubstores and supercenters offer a wealth of fresh produce, quality meats, frozen foods, bakery items, and canned goods. When you go to a big box retailer with a grocery section, it is no different than going to a stand-alone supermarket like Safeway, Wegmans, or Harris Teeter. You pick your choices and drop them in your grocery cart. You get in line and pay, just like you do at any other grocery store.
However, according to the Federal Trade Commission, Walmart, Costco, Whole Foods, etc., are not “traditional” grocery stores and therefore should not be considered in evaluating the competitive effects of the proposed merger between Kroger and Albertsons grocery chains. This $26.4 billion merger, now on hold thanks to the FTC, would combine the strengths of two national chains in order to better compete with these super-efficient supercenters and clubstores.
This FTC’s antitrust action, which had its first day in court on Monday, provides a needed bit of agitprop for Vice President Kamala Harris’s campaign against “price gouging” grocery chains and their greedy executives. There is no denying that consumers have been burned by inflation. In August 2022 home food prices were 13.5 percent higher than they were a year before. Overall, food prices have risen by 25 percent since 2020.
But it’s worth asking why the inflation in 2022 food prices equaled the entire prior decade. Did corporate executives suddenly become greedy? And why are food prices subsiding now, back to levels at or below inflation? Are those greedy executives suddenly growing a conscience?
Market experts believe the jump in food prices occurred because of supply chain issues arising from the pandemic and the global effects of the Russian-Ukrainian war. I would add that the decision by the Biden Administration to accept the emergency-spending levels of the pandemic as a new normal is another driver of inflation—our federal budget is now adding $1 trillion every 100 days to the national debt.
While inflation is abating—a sure sign that competition exists and is working—consumer anger remains palpable. So political blame must settle on someone, and surely not on the administration that Harris serves. That villain was identified by Sen. Elizabeth Warren as “good old-fashioned price gouging” corporations causing “greedflation.” In this context, FTC Chair Lina Khan’s antitrust lawsuit against the Kroger-Albertsons merger supports the Harris campaign and its proposal to use that agency to regulate food prices. But this lawsuit is bad economics and made-up law.
Khan ignores the intense competition in the grocery market from retail stores like Walmart or Costco in which the grocery section is immense, sometimes bigger than a traditional grocery store. With competitive prices and an array of choices, these grocers draw millions of customers. It is precisely because of this grocery competition from the big box stores that Kroger and Albertsons felt the need to combine their logistics and stores to compete with these behemoths.
Ohio Attorney General David Yost gets this, which is why he is asking a federal court to toss this case to the curb. “The FTC’s tunnel vision in this case risks chilling the very competition that it seeks to protect,” General Yost said. “A full view of the competitive landscape shows no reason to delay this deal further.”
While ignoring powerful players in the grocery sector, Khan and the FTC are trying to get the court to adopt the novel theory that this merger should also be nixed because of its impact on unionized grocery jobs. This ignores Supreme Court precedent that antitrust law cannot be used to regulate labor relations. More to the point, what will happen to those union jobs if Kroger and Albertsons cannot become more efficient in the face of competition from large and highly efficient national retailers?
The Kroger-Albertsons merger credibly promises to generate $1 billion in higher wages and benefits for employees and $1 billion in consumer benefits. But the actual fate of workers—and the central need for antitrust law to benefit consumers—is beside the point for today’s progressive FTC. The point is to protect the Harris campaign while enhancing the political power of the regulator.
As envisioned in Vice President Harris’s economic plan, the FTC plans to use antitrust as a fulcrum to regulate prices and therefore private business itself. If the court accepts this scheme, or if a President Harris enacts her price plan, we will essentially no longer have a vibrantly competitive grocery market.
What we will have will be a new government agency—the Department of Groceries.